United Airlines CEO paid more than $13 million

DAVID KOENIG, AP Airlines Writer

Jeffery Smisek helped put together the world's largest airline with the merger of United and Continental, and the company rewarded him by more than tripling his compensation last year to $13.4 million.

Smisek's 2011 compensation was disclosed in a proxy statement that the Chicago-based company filed Friday with the U.S. Securities and Exchange Commission. An analysis by The Associated Press calculates the value that the company put on compensation awarded to the CEO in that year and excludes changes in pension value, so it differs from the total that the company reports to the SEC.

Smisek, 57, was the CEO of Houston-based Continental Airlines and helped negotiate the combination with United. He was paid compensation valued at nearly $4.4 million in 2010.

Last year, Smisek was given stock awards that were valued at $7.53 million when they were granted in February 2011, including $4.4 million in merger incentives.

Smisek was paid a salary of $975,000, up from $791,250 in 2010; $4.41 million in separate incentive payments, up from $3.56 million in 2010; and $454,918 in other compensation, up from $9,766 the year before.

The other-compensation column included $241,457 for travel and relocation help, as well as $67,947 for insurance premiums paid by the company.

Other top United executives also got merger incentives that could become very valuable. The awards for Chief Financial Officer Zane Rowe, Chief Operations Officer Peter McDonald and Chief Revenue Officer James Compton were valued at $1.65 million apiece. Rowe announced this month he is leaving for Apple Inc.,

For Smisek to get his merger payoff, the company must hit revenue and cost-saving targets over a three-year period ending in December 2013 and achieve merger milestones. Some of those milestones have already been met.

One milestone was combining the United and Continental computerized reservations systems. The switchover last month, however, didn't go smoothly, and many customers endured long waits on hold to fix ticketing problems. Smisek apologized this week, saying the airline had failed to deliver adequate customer service.

United Continental and rivals such as Delta Air Lines Inc. have benefited from consolidation that has reduced the number of U.S. airlines and made it easier for the survivors to raise fares. United earned $840 million in 2011 and $253 million in 2010 after losing $6 billion the previous two years combined.

But lately, even fare increases and a slew of extra fees charged to passengers haven't been enough to offset sharply higher jet fuel prices. This week, United Continental reported that it lost $448 million in the first three months of the year, although the loss was smaller than analysts had feared.

Even as United Continental earned money last year, stockholders didn't share in the bounty. The airline's shares lost 26 percent of their value during 2011, although they have gained most of it back this year.

The AP's calculation of executive compensation includes salary, bonuses, perks and the estimated value of stock and stock options awarded during the year. The amount that Smisek or other CEOs eventually get can differ, depending on the performance of the company's stock after awards are granted. Most companies require an executive to wait a certain amount of time before getting stock grants or exercising options.